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Ken Boessenkool: The good, the bad and the opportunity in the federal child care plan

Commentary

Canada’s child care infrastructure is far from neat and tidy, but it does have an overarching logic to it.

Ottawa provides broad-based income support, conducts and supports research and supports provincial, territorial and First Nations roles through intergovernmental transfers. Provinces and territories oversee child care on the ground — regulating, licensing providers and providing operating and capital grants to providers, funding to local authorities for local publicly-run programs, and offering different forms of targeted supports.  

More generally, provincial policy operates primarily on the supply side of the child care equation while federal tax measures and transfers to families operate primarily on the demand side. 

The non-governmental side of Canada’s child care infrastructure includes a rich mix of providers and child care options. There are fully public providers in publicly-owned buildings at one end of the spectrum all the way through to nannies privately employed directly by families at the other. In between are charitable, non-profit and for-profit providers. There are family or day home providers, licensed and unlicensed care,  and informal care provided by parents, relatives, or friends. To add to this, there are early-learning and child care development programs that take place in high-quality care settings and others that depend on parental involvement or drop-in models.  

The design of the Canadian system reflects the four primary arguments for government giving money to parents for kids.

First, kids are not boats. Only a couple decades ago, If you were a middle income family the Canadian tax and transfer system treated your purchase of a boat the same as having a child — you got no tax or transfer benefit for either. The 2006 election was fought, among other things, on whether this should be fixed by building a new, expansive child care system or providing a universal benefit for all children in all families — $100 per child to be precise. The former would have created more gaps between supports for some families (dual earners) and not others (single earners or those using more private types of child care) while the latter created a universal benefit for all families with kids. 

Over Harper’s ten years in office, tax and transfers to families with kids grew to $19 billion annually. Trudeau boosted that to just over $22 billion and refocussed benefits toward lower income families. Not only do nearly all families get a greater tax benefit to having children than buying a boat, but the latest budget introduced a new luxury tax on boats!

Despite all the hype, the plan on child care is just the opening bargaining position of the federal government.  

Best of all, since 2006 child poverty has plummeted — a huge win for Canadian families. 

Second, beyond the public interest in children qua children — and with huge, appropriate public subsidies in place to do so — public policy should recognize also the additional cost of working or going to school while having children. Put another way, if you work you should not be disincentivized to have children and if you have children, you should not be disincentivized to work.  

Third and fourth, child care policy should correct for two other market failures. One is a signalling failure regarding the quality of care. A strong child care policy should ensure that when parents take the leap of faith required to leave their children with someone else, they have some assurance and expectation of quality of care. In a dynamic child care market, providers will always have more information than purchasers of care. For this reason, governments should play a role regulating the quality of care.  

The other market failure is the deficiency of child care spaces to meet the demands of new parents. Available spaces will be heavily influenced by the level of tax or cash support for child care because more generous support will make more money available to build spaces. It will also be influenced by the degree of regulation because a more stringent regulatory regime will increase the cost per space. Even with very generous tax or cash support and modest regulation, the market may not produce adequate spaces. Filling this gap can be achieved by targeting public subsidy for spaces, whether operating or capital. 

A trifecta of policy tools — cash and tax support for parents, regulating and funding spaces — describes Canada’s current system of child care. This system provides a great deal of policy flexibility. With it you could have modest tax support coupled with light regulation and modest subsidies for new spaces. Or you could have $7 per day care by heavily subsidizing both parents and spaces coupled with a very stringent regulatory regime on the quality of care.  

Into this trifecta of policy tools the federal government announced in its recent budget a significant injection of cash. The budget committed to rising annual contributions to the provinces peaking at a total financial commitment, including existing commitments, of $9.2 billion annually by 2025/26. 

The budget says the federal funding will flow as soon as “bilateral agreements are reached” to “make meaningful progress towards a system that works for families.” These will make up the initial five year agreements after which, “objectives and distribution of funding… would be determined based on an understanding of need and progress achieved as part of this initial plan.”  

On other words, any and all funding is contingent on reaching bilateral agreements with the provinces. Still, the federal government has laid its opening negotiating position on the table saying federal funding would allow for: 

  • A 50 per cent reduction in average fees for regulated early learning and child care in all provinces outside of Quebec, to be delivered before or by the end of 2022. 
  • An average of $10 a day by 2025-26 for all regulated child care spaces in Canada. 
  • Ongoing annual growth in quality affordable child care spaces across the country, building on the approximately 40,000 new spaces already created through previous federal investments. 
  • Meaningful progress in improving and expanding before- and after-school care in order to provide more flexibility for working parents.

The budget also notes that an “asymmetrical agreement with the province of Quebec that will allow for further improvements to their system…” because Quebec arguably already has a system that meets many of these objectives. 

There are some good things about this plan. First, Ottawa is starting this process acknowledging that child care delivery is provincial and that there are different provincial approaches — hence the asymmetrical approach it proposes for Quebec and the bilateral deals it proposes for the other provinces. The federal government does not intend on imposing a single agreement on all provinces, or even the nine provinces outside of Quebec. This is an acknowledgement that any redesign of child care must happen from the bottom up.  

This is a good thing. 

The second good thing is that this is a plan to build on the existing child care infrastructure. You can see this in the interim objective to reduce parental contributions by half and an eventual goal that continues parental contributions of $10 per day. And while these are admittedly federal aspirations rather than bilateral agreements (more on this below), the fact remains that Ottawa clearly intends to maintain parental payment rather than blowing up the system to create a free, universal, one-size-fits-all pre-pre-prekindergarten for kids as young as two — as some had been proposing. 

There are also some bad things about this plan. First, Ottawa has done nothing to fix the biggest child care program the federal government actually runs. The federal Child Care Expense Deduction (CCED) is a rich program for rich people designed for a misogynistic age. The CCED was originally intended as a measure to recognize a cost of labour market participation facing mothers who work outside the home. That’s the origin of the rule requiring that the deduction be claimed by the lower income parent. But that is based on out-dated breadwinner model of Canadian families and incorrectly treats child care only a cost of mothers working, instead of a family cost of providing care and early learning to young children.  

Another consequence of basing the deduction on the lower income spouse is that many middle and modest income families do not qualify for the credit, or qualify only for a small amount, while two-income rich families get the full benefit at their higher tax rates. The CCED needs to become a refundable tax credit — as the current Ontario government has done — so  that it is more generous to middle and lower income families based on family income not the lower income spouse. Not fixing the CCED is a bad thing. 

Another bad thing is that despite all the hype and excitement around the budget, the stark reality is that the budget plan on child care is little more than the opening bargaining position of the federal government. It is all aspiration, with the perspiration all dependent on negotiations with the provinces. 

From a provincial perspective, we are pretty much where we were prior to the budget in terms of the types and styles of provincial child care programs. Only now there is a bunch of new federal money being offered to boost those programs. It’s not even clear from the budget documents if the plan requires provinces to put up their own money — despite what is clearly another federal aspiration to have the provinces pony up an equivalent share.  

Yet, therein lies the opportunity. Now that the federal government has played its hand, all attention will turn to the provinces. They now, collectively or individually, have an opportunity to build and play their hand to make the system better. Some provinces may wish to copy the Quebec model with a cheap-per-day-program existing side-by-side with a generous refundable tax credit for those outside of that cheap-per-day program. Other provinces could reform the provincial portion of the CCED — converting it to a refundable tax credit, for example — and propose voucher programs to subsidize use and new spaces. And maybe one or two provinces could try build a free, universal, one-size-fits-all pre-pre-pre-kindergarten for kids as young as two — though that will require a lot of additional provincial investment. 

Each province should get to work designing its own preferred system, and deciding how much additional money it wishes to put up to pay for that system. Provinces should counter federal aspirations with their own aspirations.  

Then we can have a debate in each province about the merits or demerits of these proposed provincial systems, because at the end of the day it will be the provinces who have responsibility to fund and design provincial child care systems. 

This is neither neat nor tidy. By injecting dollars into provincial programs prior to reaching agreements with the provinces, Ottawa has gotten things a little backwards. Still, there are good reasons to think both levels of government can muddle towards a better outcome if they really want to do so.  

And that would be another huge win for Canadian families. 

Sean Speer: We need a ‘long telegram’ on the growing great power competition

Commentary

At 3:52 p.m. on February 22, 1946, an incoming diplomatic cable from Moscow was received by the State Department in Washington. It was addressed to Secretary of State James F. Byrnes, who had previously been appointed to the U.S. Supreme Court by President Franklin Roosevelt in 1941 but resigned after just 465 days because he couldn’t resist the pull of politics.

Byrnes is a highly underrated figure in post-WWII historiography. After serving in various senior bureaucratic roles during World War II (which earned him the unofficial title “assistant president”), there was an expectation that Byrnes would be Roosevelt’s running mate in the 1944 presidential election. Yet politics ultimately prevailed and Roosevelt instead chose Harry Truman.

Soon after Roosevelt’s untimely death and Truman’s swearing-in as president, Byrnes was appointed secretary of state and had tremendous scope to shape America’s post-WWII foreign policy including attending the Yalta Conference with Roosevelt and subsequently attending the Potsdam Conference and Paris Conference with Truman. He was a major figure in American strategizing about post-war geopolitical arrangements including the U.S. relationship with the Soviet Union. For these efforts, he was named Time Magazine’s Man of the Year in 1947.

The incoming cable back in February 1946 helped to inform and shape Byrnes’ thinking on geopolitics in general and the Soviet Union in particular. It was drafted by a senior diplomat and Sovietologist named George Kennan who had grown frustrated by his perceived lack of influence with the Truman Administration. His 5,363-word memorandum to the secretary of state was a last-ditch effort to urge him to abandon any hopes of America-Soviet cooperation and instead to see the relationship through the lens of a new economic, geopolitical, and ideological rivalry.

As he wrote:

“…we have here a political force [Soviet communism] committed fanatically to the belief that with U.S. there can be no permanent modus vivendi that it is desirable and necessary that the internal harmony of our society be disrupted, our traditional way of life be destroyed, the international authority of our state be broken, if Soviet power is to be secure.”

In light of this, Kennan called for a systematic response that recognized the Soviet threat represented the “greatest task our diplomacy has ever faced and probably greatest it will ever have to face.”

We’re missing a Kennanian strategy for how we engage China in the post-pandemic age.

Kennan’s memorandum, which famously became known as the “long telegram”, outlined a new, comprehensive strategy for managing relations with the Soviet Union. He later published an abbreviated version in Foreign Affairs magazine under the pseudonym “X.” The two documents came to fundamentally shape America’s Cold War strategy for the subsequent 40 years.

Kennan’s thinking and strategizing had such profound influence for three main reasons. The first is it was hard-headed yet empathetic. He sought to put himself in the mind of Soviet leaders and the country’s population to understand the impulses and objectives that would guide Soviet policymaking and the relationship between the day-to-day lives of ordinary citizens and the state apparatus.

The second is he was systematic. At the time of his writing, there was emerging thinking about the West’s economic relationship with Soviet Union, its defence and national security positioning vis-à-vis the Soviets, and questions about geopolitics and the future of Europe. Yet too much of this strategizing was siloed and disconnected. Kennan implored western policymakers and strategists to bring them together in a systematic strategy for the Cold War.

The third was timeliness. It was clear by the time of his writing that World War II collaboration with the Soviets would be replaced by a growing ideological and geopolitical rivalry. (Winston Churchill would deliver his famous “iron curtain” speech in Fulton, Missouri, just 11 days after Kennan’s memo reached Washington.) His memo arrived at a crucial time as policymakers were coming to realize the scope and the nature of the forthcoming challenge. Kennan armed them with a strategic framework at the precise moment that they needed one.

We could sure use a modern version of the long telegram today as the U.S.-China geopolitical rivalry intensifies and the threat of a new Cold War looms. While there’s a growing consensus that western countries need to rethink their economic and political relationships with China, there’s far less agreement on the goals, purpose and tactics of a new strategy. As Princeton University professor Aaron Friedberg has put it: “We’re now running behind [the evolving U.S.-China relationship] trying to figure out exactly what we want it to look like.”

The immediate impetus for these fast-moving developments is the COVID-19 pandemic and a growing view that the Chinese government’s cloak-and-dagger handling of the virus contributed to its global explosion and the resulting public health and economic crisis. But the truth is the West’s relationship with China has been increasingly fraught for several years. A combination of economic, geopolitical, technological, and human rights considerations has caused western policymakers and their populations to revisit basic assumptions about the relationship.

The previous strategy, which presupposed that leaning into economic cooperation in the form of expanded trade and investment would lead to a combination of greater prosperity and democratic reform, has shown itself to be a spectacular failure. China got richer but it produced a significant “shock” to certain industries and workers in western economies and the promised political liberalization never transpired. President Xi’s China is now more ruthlessly and efficiently authoritarian than it was at the start of the century.

Donald Trump’s shocking election in 2016 was due in part to his willingness to call out this failure. Now everyone from former Treasury Secretary Larry Summers to former Speaker Paul Ryan basically concedes as much.

It’s a remarkable reversal from the optimism with which we began this century. The Canadian government at the time was among the biggest boosters of the view that China’s transition from communism to something approximating market economics represented both an enormous opportunity for western businesses to leverage China’s low-cost workforce and massive domestic market as well as the geopolitical prospects of its full partnership in global governance.

Those assumptions were predicated on Korea’s history of development which saw a correlation between growing household wealth and democratization as well as the collapse of the Soviet Union which started with glasnost and ended in perestroika.

The tools of statecraft will necessarily be different than in the Cold War.

This became in academic, business and political circles a universalist theory that foresaw a predestined relationship between rising GDP per capita and burgeoning democracy. Yet China’s real-life experience hasn’t conformed to this overdetermined theory. Instead it’s once again shown that history isn’t History — a proper noun reflecting autonomous forces unfolding to an inner logic — but rather a matter of individual and collective choices. Western leaders forgot this crucial insight. They somewhat ironically proved to be more Marxist than China’s communists.

The question, of course, is what comes next?

We need a modern version of the long telegram to fully and properly answer it. We’re missing a Kennanian strategy for how we engage China in the post-pandemic age.

This is particularly important for Canada which has already experienced the profound challenges of being stuck in the middle of a growing “great power competition” between the U.S. and China. A protracted, zero-sum conflict between its first and third largest trading partners will necessarily have far-reaching consequences for Canada’s economic and geopolitical interests.

It’s not quite correct, by the way, to describe the U.S.-China rivalry as a new Cold War. The two countries are much more economically integrated than was the case with the Soviet Union. Their rivalry is also less about ideological conflict and more about technological competition in strategic areas such as artificial intelligence, biopharma, and semi-conductors. That these technologies tend to have both commercial and military applications only reinforces the seriousness and urgency. Former U.S. Vice President Mike Pence has called it a battle for the “commanding heights of the 21st century economy.”

The tools of statecraft will therefore necessarily be different than in the Cold War. A technology-based competition will require serious and practical thinking about, among other things, supply chains, intellectual property, basic and industrial research, foreign investment, free trade, and cybersecurity. It will be less about vanquishing the other side and instead more about staying ahead in an ongoing technological race.

The policy and governance implications for Canada are significant. Recent essays for The Hub by famed foreign policy expert Janice Stein, Macdonald-Laurier Institute scholar Balkan Devlen, former Religious Freedom Ambassador Andrew Bennett, and anti-money laundering expert Matthew Grills outlined various considerations for Canadian policymakers.

What’s interesting though is that as much as Kennan’s long telegram was focused on policy and governance questions, his key recommendations were mostly about our own social cohesion, community vitality, and civic confidence. As he wrote:

“Much depends on health and vigor of our own society. World communism is like malignant parasite which feeds only on diseased tissue. This is the point at which domestic and foreign policies meet. Every courageous and incisive measure to solve internal problems of our own society, to improve self-confidence, discipline, morale and community spirit of our own people, is a diplomatic victory over Moscow worth a thousand diplomatic notes and joint communiqués. If we cannot abandon fatalism and indifference in face of deficiencies of our own society, Moscow will profit.”

This is a key insight: although foreign policy issues tend to be highly contingent, there’s nothing stopping us from trying to “solve internal problems of our own society.” Recommitting ourselves to the aspirational goals of growth, dynamism, and a renewed sense of collective purpose is squarely within our purview.

It turns out that the best way to navigate the tumultuous world of post-pandemic geopolitics is the same thing we need to do to address the growing pessimism and polarization in our society. Basically we need a narrative and vision to overcome what New York Times columnist Ross Douthat has called “decadence” and to replace it with something perhaps approximating what American conservative writers David Brooks and Bill Kristol once referred to as “greatness.”

A “national greatness” agenda may be too grandiose. The Hub contributor Howard Anglin, for instance, has written in favour of more modest ambitions. But the key point here is that, as Kennan notes, we must reject fatalism and indifference and instead recognize that we have greater control over our destiny than we often realize. As he put it in his memo: “I would like to record my conviction that [the Soviet] problem is within our power to solve.”

Many experts agree that the U.S.-China geopolitical and technological rivalry will likely shape the rest of this century. How countries such as Canada navigate this new world will be the key question facing their political leaders in the coming years. It should start with a plan to get us out of decadence. A modern-day George Kennan and his long telegram would help too.